Correlation Between Shifa International and MCB Bank
Can any of the company-specific risk be diversified away by investing in both Shifa International and MCB Bank at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Shifa International and MCB Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shifa International Hospitals and MCB Bank, you can compare the effects of market volatilities on Shifa International and MCB Bank and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Shifa International with a short position of MCB Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shifa International and MCB Bank.
Diversification Opportunities for Shifa International and MCB Bank
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Shifa and MCB is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Shifa International Hospitals and MCB Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MCB Bank and Shifa International is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Shifa International Hospitals are associated (or correlated) with MCB Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MCB Bank has no effect on the direction of Shifa International i.e., Shifa International and MCB Bank go up and down completely randomly.
Pair Corralation between Shifa International and MCB Bank
Assuming the 90 days trading horizon Shifa International Hospitals is expected to generate 1.54 times more return on investment than MCB Bank. However, Shifa International is 1.54 times more volatile than MCB Bank. It trades about 0.09 of its potential returns per unit of risk. MCB Bank is currently generating about 0.04 per unit of risk. If you would invest 40,041 in Shifa International Hospitals on December 2, 2024 and sell it today you would earn a total of 5,968 from holding Shifa International Hospitals or generate 14.9% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Shifa International Hospitals vs. MCB Bank
Performance |
Timeline |
Shifa International |
MCB Bank |
Shifa International and MCB Bank Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Shifa International and MCB Bank
The main advantage of trading using opposite Shifa International and MCB Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shifa International position performs unexpectedly, MCB Bank can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in MCB Bank will offset losses from the drop in MCB Bank's long position.Shifa International vs. Pakistan Reinsurance | Shifa International vs. Apna Microfinance Bank | Shifa International vs. Bawany Air Products | Shifa International vs. Standard Chartered Bank |
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Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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